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Tuesday, 10 November 2015

A few macro and related thoughts today...

A few macro and related thoughts today...

Europe – David Cameron launches his four principles
to help give comfort/support for ‘stay’ voters in the forthcoming referendum
with a ‘frenzied month of diplomacy’. Meanwhile EU President Donald Tusk
said Germany needs to make it clear that Europe’s ability to absorb refugees is
limited, challenging Chancellor Angela Merkel to signal toughness alongside
moral principles, saying the issues are “…of a European rather than
specifically German nature...But whether Europe is
able to meet those challenges will depend largely on Germany’s attitude.” More fun in Europe...

Portugal – “Germany loses key ally in Portugal as
austerity regime crumbles. 'We don’t have a coup here: we have democracy.
Whoever lacks the votes in the national assembly cannot govern,' says the
leader of the Left Bloc”. Good report and charts here. More fun in Europe #2.

Greece/Spain – In Greece, Eurozone finance ministers
were scheduled to sign off a €2bn payment tranche at a Monday evening meeting
in Brussels, but ministers said a stand-off over repossession protections for
homeowners would delay the payment for at least a week, and potentially
longer. Meanwhile did you see in Spain yesterday that the regional
parliament in Catalonia passed a resolution calling for ‘the first concrete
steps towards disconnecting from the rest of Spain’?! More fun in Europe #3.

Nevertheless...I do feel that the euro is oversold here as nicely shown by this sentiment chart...

...also worthwhile reading this report by GaveKal Capital on the euro and the ECB balance sheet:

Global growth - will be lacklustre over the next two
years as the slowdown in China and other emerging markets continues to weigh on
the world economy, Moody's Investors Service said in a report published today.
Moody's forecasts that G20 GDP growth will average 2.8% in 2015-17, only 0.3
percentage point higher than in 2012-14 and below the 3.8% average recorded in
the five years before the global financial crisis. Similar tone to the OECD report yesterday...

Overnight economics - Chinese CPI misses expectations
to print a 6-month low while PPI posted a 44th consecutive month of decline....
The main culprit for the deceleration was food.

Interesting on Chinese stimulus over time…

(both charts via @Callum_thomas)

Meanwhile UK BRC Sales Like-For-Like (YoY) Oct: -0.2% (exp
0.8% prev 2.6%) marking the weakest performance for the month of October
since 2008. The slowdown may have been partly down to shoppers
holding off for the November "Black Friday" sales, which have become
increasingly popular over the last few years in Britain, the BRC said.

Saudi – to tap international bond markets for the
first time

Earnings – the more international the business, the
worse the earnings look…another reason why the US dollar is too high...

More on global liquidity – got to keep watching this. The Fed should be citing global issues/hindrances...

(h/t @eurofaultlines)

...especially given this great take on US wages: was the increase last
Friday as great as you think? And hence is the rationale for a rate increase as strong as perceived?